Author Topic: BH - Biglari Holdings  (Read 1357139 times)

Txvestor

  • Sr. Member
  • ****
  • Posts: 308
Re: BH - Biglari Holdings
« Reply #1500 on: March 21, 2015, 08:12:40 PM »
So wait, people here are still voting for Biglari? Holy shit! Keep the topic alive guys, much appreciated...

I voted for Groveland.

Down with Big Government!  ;D  8) Vive la revolution!

Not sure if you're joking or not as the quote is funny.
It's good to have some people against Biglari so the board doesn't become an echo chamber.
Disagreement should be encouraged.
That being said, I'm still at a loss they think BH is closer to bankruptcy than in August 2008.
Financing was impossible in August 2008.
I really hope Swenson doesn't believe such a claim.
It'll be interesting to see the vote count.
I wish I could make some type of bet on him losing as Biglari will take zero chance of losing. He'll capitulate to Mario if he has to.

If he capitulates to mario, he gets 10% of the vote. If he votes BH block of shares he holds in the lion fund, that is 19%. So i don't think he will accede to Mario.


Redskin212

  • Full Member
  • ***
  • Posts: 153
Re: BH - Biglari Holdings
« Reply #1501 on: March 21, 2015, 08:18:58 PM »
owner operator?  It's bad enough that Sardar constantly throws around words like founder, founded, entrepreneurial, etc - but I think it is important to remember that he hasn't founded any of the companies and is a paid manager, not a founder or owner operator.  There is a big difference.  It is important to remember who's capital it is.  It is not Sardar's capital.

Why is it in shareholders' best interest to pay hedge fund fees on treasury shares just so Sardar can vote them?  At the very least, there should be no fees paid on company stock owned by the company.  Even the investors on this board who justify this voting arrangement because they want him to have control should be able to agree that it makes no sense to pay him incentive fees on BH shares owned by BH.  It is one of the most egregious corporate governance lapses I've ever seen - and I've been to China...

That is fantastic!!  Well said.

Vote the few shares I have for Groveland today - would love to see a groundswell vote against Sardar.

frugalchief

  • Full Member
  • ***
  • Posts: 159
Re: BH - Biglari Holdings
« Reply #1502 on: March 22, 2015, 06:19:41 AM »
I think the record date was March 3 or 5.  I was curious why TLF stopped buying BH stock since they still had shares left.  Of course, if they hit the top of their price I understand.

The one thing I hope they weren't doing (I don't believe so), was support the stock price and make it rise to make it look like it was doing well.  When TLF started buying the stock was around $350 and those purchases bumped it to the $420 range.  Would seem a "coincidence" among the proxy contest to do something like that.  Regardless, the stock was cheaper back in the $300's, and still is resonably cheap today.  And not supporting Groveland, but I don't care about the price right now unless it allows me to buy more.  I hope the stock price stays or goes down for the next few years while the business value/intrinsic value continues to increase like it has been doing for years while the stock has stayed around the same.

But of course, most people don't think like me.

Good observations - nothing will surprise me about Biglari's tactics - is there a record date or something of the sort for voting?

Another thing occurred to me: the 62,000 or so share purchase authorization still has at least 15,000 or so shares left on it.  I don't think the company has purchased its own shares in the last month or so.  It will be interesting to see if they resume buying sort of strategically to spike the price in the run up to the vote.

peridotcapital

  • Hero Member
  • *****
  • Posts: 500
    • Peridot Capital Management LLC
Re: BH - Biglari Holdings
« Reply #1503 on: March 23, 2015, 06:16:38 AM »
I just read Restaurant Brands International's annual report and a thought occurred to me regarding a section of my looong valuation post that I cut out.  This section was regarding refranchising.  If Biglari continues to run Biglari Holdings, or even if someone else is running it, I would guess that sometime down the road there will be a significant refranchising initiative.  Biglari, from reading people's notes of past annual meetings, indicated that he was not going to pursue refranchising for SNS, except in minor opportunistic ways (like the two Austin stores).  But his comments seemed aimed at that particular time.  When they were building a serious and scalable franchising infrastructure at Steak n Shake refranchising of course doesn't make sense.  When you're trying to get franchisees to invest capital to open units, that would be complicated if the franchisor was out there selling off its 400 plus units.  Additionally, when Biglari felt there was low and medium hanging fruit yet to be picked in regards to the average unit volumes of company-owned Steak n Shakes - it of course didn't make much sense to refranchise.  But when I think about it, as some point in the future, it likely will make sense.  Once the franchise platform has been in place for a number of years and they are servicing hundreds of Steak n Shake franchises, and they've grown the average unit volume of company-owned stores as much as they think they can without significant additional investments, that would likely change the calculus.  Especially if Biglari, or whoever is running it, felt they could put the capital to work in other investments/acquisitions.

Chad, Mcmaaaath, others - any thoughts on this?  What do you think the company-owned units would sell for to franchisees?  This sort of initiative could generate hundreds of millions in cash within the space of a few years at some point in the future.  The obvious model for this is Burger King a few years ago, but there are others as well.  Particularly if a capital allocator is running Steak n Shake, this path could make a lot of sense in the future.

From a buyer's perspective, they are not going to pay a ton more than a new franchise would cost, so it would have to make financial sense for them as well. The 420 owned units earn more than $100 million of EBITDA annually. Would refranchising be hugely accretive? I don't think it would be blatantly so, so it really would probably come down to whether he wanted out of the owned restaurant business completely or not. Hard to say at this point. If I were him, I'd probably do a sale leaseback of the owned real estate before I refranchised them. With today's cap rates, I'm actually surprised he is not considering that move currently. It was very easy for Darden to sell the Red Lobster real estate and it fetched a very good price.

gfp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1835
Re: BH - Biglari Holdings
« Reply #1504 on: March 23, 2015, 07:08:43 AM »
GAMCO has been selling a few shares and wrote another letter to BH asking nicely whether or not they will abstain from voting the company owned shares.  Updated filing and PDF of the newest letter below:

http://www.sec.gov/Archives/edgar/data/93859/000080724915000052/0000807249-15-000052-index.htm

Txvestor

  • Sr. Member
  • ****
  • Posts: 308
Re: BH - Biglari Holdings
« Reply #1505 on: March 23, 2015, 10:54:07 AM »
GAMCO has been selling a few shares and wrote another letter to BH asking nicely whether or not they will abstain from voting the company owned shares.  Updated filing and PDF of the newest letter below:

http://www.sec.gov/Archives/edgar/data/93859/000080724915000052/0000807249-15-000052-index.htm

I suspect he will not respond. Those shares he controls represent a clear conflict of interest. Here we have a large institutional shareholder willing to greatly soften the blow and yet he is not biting.
Biglari might very well be a talented capital allocator but if you invest with him under these circumstances, you are entrusting your capital entirely to his whim and fancy.
He clearly does not have the long demonstrated ethical standards of WB or PW and does not appear to have the capacity to self reflect.
FWIW I think he will win this time, but I'm hoping the margin is close and it is the shares that he holds in the LF that puts him over the top.

peridotcapital

  • Hero Member
  • *****
  • Posts: 500
    • Peridot Capital Management LLC
Re: BH - Biglari Holdings
« Reply #1506 on: March 23, 2015, 01:23:04 PM »
I just read Restaurant Brands International's annual report and a thought occurred to me regarding a section of my looong valuation post that I cut out.  This section was regarding refranchising.  If Biglari continues to run Biglari Holdings, or even if someone else is running it, I would guess that sometime down the road there will be a significant refranchising initiative.  Biglari, from reading people's notes of past annual meetings, indicated that he was not going to pursue refranchising for SNS, except in minor opportunistic ways (like the two Austin stores).  But his comments seemed aimed at that particular time.  When they were building a serious and scalable franchising infrastructure at Steak n Shake refranchising of course doesn't make sense.  When you're trying to get franchisees to invest capital to open units, that would be complicated if the franchisor was out there selling off its 400 plus units.  Additionally, when Biglari felt there was low and medium hanging fruit yet to be picked in regards to the average unit volumes of company-owned Steak n Shakes - it of course didn't make much sense to refranchise.  But when I think about it, as some point in the future, it likely will make sense.  Once the franchise platform has been in place for a number of years and they are servicing hundreds of Steak n Shake franchises, and they've grown the average unit volume of company-owned stores as much as they think they can without significant additional investments, that would likely change the calculus.  Especially if Biglari, or whoever is running it, felt they could put the capital to work in other investments/acquisitions.

Chad, Mcmaaaath, others - any thoughts on this?  What do you think the company-owned units would sell for to franchisees?  This sort of initiative could generate hundreds of millions in cash within the space of a few years at some point in the future.  The obvious model for this is Burger King a few years ago, but there are others as well.  Particularly if a capital allocator is running Steak n Shake, this path could make a lot of sense in the future.

From a buyer's perspective, they are not going to pay a ton more than a new franchise would cost, so it would have to make financial sense for them as well. The 420 owned units earn more than $100 million of EBITDA annually. Would refranchising be hugely accretive? I don't think it would be blatantly so, so it really would probably come down to whether he wanted out of the owned restaurant business completely or not. Hard to say at this point. If I were him, I'd probably do a sale leaseback of the owned real estate before I refranchised them. With today's cap rates, I'm actually surprised he is not considering that move currently. It was very easy for Darden to sell the Red Lobster real estate and it fetched a very good price.

Good points.  Since the normal franchise units currently opening cost around $1.5 million to $2 million - doesn't that mean a refranchising initiative could get $750 million in cash at some point.  They could do a number of sale and leasebacks and then refranchising and end up with a $900 million in capital to invest.

Sure, but I would guess he values very highly the recurring free cash flow stream from those units, especially as he continues to grow quickly to diversify BH. If he keeps those units and uses the interested franchisees to expand's SNS's domestic footprint (as opposed to using them to take over existing units), I think SNS would get bigger, faster. Since he prefers gross profit dollars (over margins), I would guess he would hold onto them. But who knows.

vinod1

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1327
    • My Blog
Re: BH - Biglari Holdings
« Reply #1507 on: March 23, 2015, 03:45:19 PM »
Since the normal franchise units currently opening cost around $1.5 million to $2 million

NBL,

Could you please let me know where you got this number from? Is it your estimate? Could you give a little more color on this?

Thanks

Vinod
The fundamental algorithm of life: repeat what works. –Charlie Munger

Parsad

  • Administrator
  • Hero Member
  • *****
  • Posts: 8770
Re: BH - Biglari Holdings
« Reply #1508 on: March 23, 2015, 03:57:58 PM »
owner operator?  It's bad enough that Sardar constantly throws around words like founder, founded, entrepreneurial, etc - but I think it is important to remember that he hasn't founded any of the companies and is a paid manager, not a founder or owner operator.  There is a big difference.  It is important to remember who's capital it is.  It is not Sardar's capital.

Why is it in shareholders' best interest to pay hedge fund fees on treasury shares just so Sardar can vote them?  At the very least, there should be no fees paid on company stock owned by the company.  Even the investors on this board who justify this voting arrangement because they want him to have control should be able to agree that it makes no sense to pay him incentive fees on BH shares owned by BH.  It is one of the most egregious corporate governance lapses I've ever seen - and I've been to China...

That is fantastic!!  Well said.

Vote the few shares I have for Groveland today - would love to see a groundswell vote against Sardar.

Sadly, I'm not sure BH shareholders would be best served by either Sardar or Swenson.  I keep looking at those Seth Barkatt Facebook pictures and think to myself why would Swenson nominate such a stooge for the board!  The one that gets me is "I made a million dollars today!  How was your day?"  Geez!  A sad day for shareholders all round!  Cheers! 

No man is a failure who has friends!

wescobrk

  • Hero Member
  • *****
  • Posts: 677
Re: BH - Biglari Holdings
« Reply #1509 on: March 23, 2015, 04:23:55 PM »
owner operator?  It's bad enough that Sardar constantly throws around words like founder, founded, entrepreneurial, etc - but I think it is important to remember that he hasn't founded any of the companies and is a paid manager, not a founder or owner operator.  There is a big difference.  It is important to remember who's capital it is.  It is not Sardar's capital.

Why is it in shareholders' best interest to pay hedge fund fees on treasury shares just so Sardar can vote them?  At the very least, there should be no fees paid on company stock owned by the company.  Even the investors on this board who justify this voting arrangement because they want him to have control should be able to agree that it makes no sense to pay him incentive fees on BH shares owned by BH.  It is one of the most egregious corporate governance lapses I've ever seen - and I've been to China...

That is fantastic!!  Well said.

Vote the few shares I have for Groveland today - would love to see a groundswell vote against Sardar.

Sadly, I'm not sure BH shareholders would be best served by either Sardar or Swenson.  I keep looking at those Seth Barkatt Facebook pictures and think to myself why would Swenson nominate such a stooge for the board!  The one that gets me is "I made a million dollars today!  How was your day?"  Geez!  A sad day for shareholders all round!  Cheers!
I'm in complete agreement with you, Sanjeev. It wasn't like he was 18. He was in his 30's when he took that photo.
A major d-bag.